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# AT&T says it will start deploying new 5G spectrum this year, raises HBO subscriber forecast

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AT&T says it will start deploying new 5G spectrum this year, raises HBO subscriber forecast

CTO says increased at-home data demands support company’s bullish view of fiber

AT&T Inc. increased its long-term forecast for HBO and HBO Max subscribers Friday while disclosing that it plans to start deploying later this year some of the new mid-band spectrum it acquired at a recent spectrum auction.

The company now expects its HBO and the HBO Max streaming service to have 120 million to 150 million subscribers by the end of 2025, ahead of the company’s prior projection of 70 million to 90 million, which came in October 2019.

Shares of AT&T
T,
+0.91%
gained 1% in Friday trading after the company held an investor day presentation that touched on the various components of the telecommunications giant’s business.

AT&T shared information about its wireless plans, including its intent to begin deploying some of its recently acquired C-band spectrum this year. The company expects it will start deploying the first 40 megahertz of spectrum by the end of 2021.

C-band represents “the sweet spot in terms of coverage and speed” when it comes to thinking about 5G, Chief Technology Officer Andre Fuetsch told MarketWatch. While it will take time before AT&T is able to access all of the mid-band spectrum it acquired in the latest auction and deploy it, Fuetsch said that the company was also working on other types of 5G deployments including fast millimeter-wave setups in some airports.

Read: Verizon spends $45 billion in major 5G spectrum auction, while AT&T spends $23 billion

The company projects that it will spend $6 billion to $8 billion in capital expenditures as it deploys this spectrum, with most of the spending coming from 2022 to 2024.

AT&T also expects that its fiber business will be in 3 million new customer locations by the end of this year. Fuetsch argued that fiber is more attractive now given people’s increased reliance on connectivity within their homes and the expectation that bandwidth demands will only grow as things like 4K and even 8K video become more widespread.

In addition, “Upstream” consumption, meaning uploads, is accelerating more quickly than “downstream” consumption, or downloads, Fuetsch said. Because fiber is a “symmetrical network,” it can transmit large amounts of capacity equally in both directions, according to Fuetsch.

About 70% to 80% of connectivity demand for mobile devices like smartphones occurs when the devices are connected to WiFi via broadband, he said. “Having fast, secure broadband in our homes is really important because that’s where we’re doing the heaviest consumption.”

Cowen & Co. analyst Colby Synesael wrote that “perhaps more importantly” than giving a projection for 3 million new fiber locations this year, AT&T signaled on its investor-day call that it could increase that pace to 4 million new locations next year.

“The longer-term cadence will depend on the observed success,” Synesael wrote, though he said that AT&T’s management “sees bullish signals” in things like take rate and forecasted demand driven by increased 4K TV adoption.

The company is targeting a ratio of net debt to adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) of 3.0 times, which AT&T says assumes an increase in net debt of roughly $6 billion to fund its recent spectrum purchases.

Don’t miss: Why Verizon, AT&T and T-Mobile just spent $80 billion in an auction, and what it will mean for 5G

AT&T aims to lower that debt ratio to 2.5 times during 2024 by using “all cash flows after total dividends to pay down debt” and looking for “opportunities to monetize non-strategic assets.” AT&T isn’t planning to repurchase stock while it moves to lower its debt ratio.

The company expects that it will “have the flexibility to meet its 2021 financial commitments” including dividend of almost $15 billion, spectrum payments of about $23 billion, gross capital investment of $21 billion and “continued repayment of debt.”

AT&T shares have lost 3.9% over the past three months as the S&P 500
SPX,
+0.10%
has risen 7.6%.

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